Industrial state lawmakers today called for strong action to prevent China and other suppliers from flooding the U.S. market with unfairly priced and subsidized steel, including turning back shipments that deliberately circumvent U.S. duties.
"I think that would be a very powerful way to send a message if we just simply turned some ships around if they contain illegal steel," Sen. Amy Klobuchar told an Obama administration panel at a hearing to examine ways to help the U.S. steel industry weather the current adverse conditions.
"We can do that. We have the power to do that," the Minnesota Democrat said. "We have to make sure the penalties for dumping steel into our market are so severe that these foreign companies that are violating the law will stop doing it."
U.S. steel companies complain that China and other foreign suppliers are adept at finding ways of circumventing anti-dumping and countervailing duties, such as by shipping products through third countries to disguise their source.
Compounding that problem, China is exporting record levels of steel as a result of its massive production overcapacity and weaker domestic demand. Although U.S. imports from China actually declined last year, U.S. steel companies blame the Asian manufacturer for depressing world prices, leading to increased imports from other suppliers and more than 12,000 layoffs in the United States.
U.S. Trade Representative Michael Froman, who chaired the first morning of the two-day hearing, said the administration was pursuing a number of options to help the steel sector, including a possible multilateral agreement to rein in global steel production.
"We're working with allies and partners, including Canada, Mexico, Japan and the United Kingdom, to seek commitments from key producer countries on capacity and production reductions," Froman said. He added that Deputy USTR Robert Holleyman and Commerce Undersecretary Stefan Selig will lead a government and industry delegation to Brussels next week to push for that agreement.
U.S. government and industry officials will also hold direct talks with China next month in Washington under the steel dialogue portion of the Joint Commission on Commerce and Trade, Froman added.
"While we express our willingness to work closely with China on this issue as cooperatively as possible, we'll also remain clear that they cannot shift their excess capacity onto global markets without serious trade responses," Froman said.
A number of lawmakers stressed the need for the Obama administration to make full use of a recently approved trade enforcement bill to quickly apply the steepest possible duties on illegally dumped and subsidized goods.
"Our steel companies shouldn't have to wait and watch subsidized or dumped imports drive them to the verge of going out of business or force them to lay off hundreds of workers before they can get relief," Sen. Rob Portman said.
The administration should also bring a World Trade Organization case against China to force it to cut excess capacity and be prepared to support the U.S. steel industry if it decides to ask for broad emergency import protections under "Section 201" of U.S. trade law, Sen. Sherrod Brown added.
Both of the Ohio senators took the opportunity to call for the renegotiation of the auto rules-of-origin provisions of the Trans-Pacific Partnership agreement, which they argued would open the door for Canada and Mexico to use more Chinese-made auto parts and still qualify for duty reductions.
"The more foreign auto parts can be incorporated into a TPP-trade car, the less U.S. steel is used to make the vehicle," Brown said.
Lawmakers and steel company executives also were adamant that China not be granted market economy status, to which Beijing believes it is entitled this year under the terms of its entry into the WTO in 2001. The upgrade would change how anti-dumping duties are calculated on Chinese goods, potentially leading to lower penalties.
"We cannot give them market economy status, and they're pushing for that like crazy," Laurence Traub, president of Intermetals Corp., said on behalf of the American Institute for International Steel, a group representing international steel producers that often opposes U.S. trade remedy actions.
"It has to be a level playing field," Traub said. "The state-owned enterprise situation is going to destroy the world right now in terms of steel production. We're all going to be reliant upon China."
The head of the steelworkers union said President Barack Obama should use a combination of authorities to reduce imports by a third within three months, including Section 232 of U.S. trade law, which allows the White House to take action on national security grounds."It's tremendously important that the president take the initiative," United Steelworkers President Leo Gerard said, urging Obama to enlist other world leaders in the cause.